The Economic Value of Basin Protection to Improve the Quality and Reliability of Potable Water Supply: Some Evidence from Ecuador

contamination likely was caused by households living in the micro-basins and without access to
the city’s sewer system and/or result from livestock production activities in the area. There is
also the potential of water contamination from agrochemicals that are used in agriculture and
livestock production. It is also believed that the basin’s water supply has been adversely affected
because of the logging of the natural forests in the “Zamora Huayco” basin which has decreased
forested land from 1,630 hectares in 1976 to 1,247 in 1998 (Benavides and Solano, 2005). ¹

Literature Review

Several studies have estimated the monetary value of a specified level of change in the water
supply service in developed and developing countries. In the United States these studies suggest
city residents are willing to pay sizeable sums to avoid even minor restrictions in the supply of
water. Griffin and Mjelde (2000) examined customers’ preferences for water supply security in
seven Texan cities. Respondents were willing to pay, on average, between $25 and $34 (1997 US
Dollars) to avoid an occurrence of water restrictions. They also found that respondents were
willing to pay, on average, $9.80 per month (or 26 per cent of their bill) to improve future supply
security levels. Koss and Khawaja (2001) found that California consumers were willing to pay,
on average, between $11 and $17 more per month to avoid restrictions (1993 US dollars),
depending on the frequency and severity of the restrictions.

Several Latin-American studies have investigated the value of improved water supply
services. In a study conducted in Mexico City, Montes de Oca et al. (2003) observed that
households were willing to pay more than double the price they currently pay (147 percent

¹ There is still an ongoing international scientific debate regarding the relation between vegetation types (i.e.,
pastures versus natural forests) and long-term water balance in catchment areas (Andréassian, 2004). However, there
is some evidence regarding the flow-stabilization capacity of the Andean ecosystems in high altitudes (Buytaert et
al., 2005).

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